France Budget Deficit Will Pass EU Limit

Published 7:00 pm, Monday, February 17, 2003

France's employers' federation on Tuesday predicted the nation's budget deficit for 2003 would surpass the limit set by the European Union.

Ernest-Antoine Seilliere, the president of the Movement of French Businesses, said France's budget deficit would likely exceed 3 percent of the nation's gross domestic product as economic growth slows and public spending rises.

The government has forecast that the 2002 deficit would be 2.8 percent of GDP, and fall to 2.6 percent this year _ estimates seen as overly optimistic by many economists and business leaders.

Seilliere said the business group forecast that the economy would expand in 2003 by between 1 percent and 1.5 percent, revising an earlier forecast of between 1.5 percent and 2 percent growth.

The possibility of war in Iraq was weighing on consumer confidence and contributing to slower growth, making it difficult for the government to rein in the budget deficit, Seilliere said.

France is struggling to keep the budget deficit within the limits set by the EU's Stability and Growth pact, which requires that deficits stay under 3 percent of GDP. Repeated breaches of the 3 percent barrier can lead to fines.

France has urged a softening of the EU rules and gone ahead with contentious tax cuts saying that in times of economic slowdown, stimulating growth is more important than sticking to the letter of the budget rules.